New Zealand police also seized guns, artwork, more than €6m in cash and luxury cars valued at nearly €3.6m after serving 10 search warrants at several businesses and homes around the city of Auckland.

The Megaupload site was shut down yesterday over US accusations that it facilitated millions of illegal downloads of films, music and other content, costing copyright holders at least €360m in lost revenue.

With 150 million registered users, about 50 million hits daily and endorsements from music superstars, Megaupload.com was among the world's biggest file-sharing sites. Big enough, according to a US indictment, that it earned founder Kim Dotcom €32m last year alone.

The company is based in Hong Kong and Mr Dotcom was living in New Zealand, but some of the alleged pirated content was hosted on leased servers in Virginia, and that was enough for US prosecutors to act.

Yesterday, the four defendants stood together in an Auckland courtroom in the first stage of extradition proceedings that could last a year or more.

Dotcom's lawyer raised objections to a media request to take photographs and video, but then Mr Dotcom spoke out from the dock saying he did not mind photos or video "because we have nothing to hide".

The judge granted the media access, and ruled that the four would remain in custody until a second hearing on Monday.

Mr Dotcom is Megaupload's former chief executive and current chief innovation officer. He is a resident of Hong Kong and New Zealand and a dual citizen of Finland and Germany. He had his name changed legally. The 37-year-old was previously known as Kim Schmitz and Kim Tim Jim Vestor.

The other defendants are two German citizens and one Dutch citizen. Three other defendants -- a German, a Slovakian and an Estonian -- remain at large.

The Electronic Frontier Foundation, which defends free speech and digital rights online, said that the arrests set "a terrifying precedent. If the US can seize a Dutch citizen in New Zealand over a copyright claim, what is next?"

The indictment was unsealed one day after websites, including Wikipedia, shut down in protest against two US congressional proposals intended to make it easier for authorities to go after sites with pirated material, especially those with overseas headquarters and servers.

Before Megaupload was taken down, the company posted a statement saying allegations that it facilitated massive breaches of copyright laws were "grotesquely overblown".

"The fact is that the vast majority of Mega's internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch," the statement said.

Estimates by companies that monitor web traffic place the firm in the top 100 most frequently visited sites on the net.